I used to be extremely cheap, as in I took the toilet paper rolls from the business school stalls so I didn’t have to buy my own.
I’m still very cheap, but I’ve learned that being cheap has additional costs. I’ve shifted to becoming more frugal. I spend more on things I value and spend less on things that don’t improve my life.
The time I was most cheap was when I went to visit my girlfriend for the first time. We’d met online and had talked for 2 years before I flew out to meet her. Instead of flying directly to the city, I tried to be cheap by flying to Dallas and taking a Megabus 4 hours. That was fine on the way over, but on the way back after she dropped me at the bus station I found out my bus back to Dallas was cancelled. My flight was in 6 hours and the drive was 4. I panicked.
She drove me 4 hours to the airport and 4 hours back home. Looking back now, I realized what a waste of time and money it was to fly to Dallas rather than spending a bit extra to fly right into the city.
That was 5 years ago and I haven’t bought a cheap flight since then. We have flown out of Dallas, but for that flight we were able to rent a car and still saved nearly $500 each on our flights. In that case it made sense. But for nearly every other flight we go out of our nearby airport or one an hour away.
I’ve come a long way since that experience. I’m much more willing to spend on higher quality items and experiences that I value, especially ones that will save time.
Frugal vs. Cheap
It took a while to realize the difference between frugal and cheap.
I was being cheap when I bought the flight and bus. Those 8 hours tacked on by taking the bus were definitely not worth the $100 or $150 I saved.
Being cheap had associated costs: wasted time, poor experience, low quality.
Now, rather than buying a pan for $10 that will likely start to wear down, I spend $50 and know the pan will last decades. I don’t use price as the qualifier for a quality purchase. I know that a Calphalon pan is more durable than a Target pan, not just because of the brand but through experience.
I’m not willing to spend $100 more to fly out of the nearby airport than to fly out of the one that’s 1.5 hours away. It would mean paying to park, gas, at least 3 additional travel hours, and the headache of driving before and after the flight.
The same thing goes for products I know I will use a lot. A bought cheap bluetooth headphones from Amazon. I’ve had to replace 2 pairs already, and now I’m using the ones my girlfriend got because her’s haven’t broken yet. But once they do break, I’m going to spend more on a quality pair even if it’s $100 because I use them so much.
If it’s a product I don’t use a lot or where don’t need to rely on the quality, I’ll be cheap. I get the cheapest toilet paper at Costco, and the cheapest oatmeal. I don’t notice that my life is any worse off by using these cheaper alternatives.
But I do notice an improvement in my life when I spend an extra $100 to fly out of the nearby airport or to get a flight that is direct.
Hedonic vs. Utilitarian Spending
This chart illustrates what purchases I value and whether I’m willing to spend on them or not spend as much (sacrifice). Most of the purchases I’m willing to spend more on end up being hedonic.
I spend more on only a few hedonic things: travel, plants, and an espresso machine (which we plan to purchase this year). These are things I value, so I don’t mind spending extra in order to make sure the item or experience is higher quality. My girlfriend/fiancee got into plants and I love how they look in the apartment, so we spend on getting more.
Utilitarian items like toothpaste, razors, paper towels I’ll end up spending less on because I just buy the store brand. I don’t see the need to buy name brand toilet paper or plastic bags. The main utilitarian category I’ve started spending more on are for items I’ll use when I travel. These include a new Osprey backpack and travel sneakers. If I can find something that will make traveling easier, I’ll usually get it.
For groceries, it’s a mix. I will spend more on food that tastes better and I tend to occasionally buy food we enjoy but don’t need, like sushi. I’m willing to spend more on groceries because I like to cook and eat. But I will sacrifice on certain items because the store brand is the same as the name brand to me (cereal, meat, pasta, almond milk). Although almond butter and frozen berries can be expensive, I buy them so I always have some in the fridge to make smoothies which I look forward to after working out. I value coffee and have found some good beans we like at Costco, so we always have coffee on hand. We could spend more on coffee (getting it at a roaster we like) but this coffee is good enough for us that we don’t feel the need to spend more.
Have you gone through an exercise like this? Making the chart above helped me think about what I value and what I am willing to sacrifice. It’s a good way to force yourself to notice what you could spend less on, so you can spend more on what you care about or what improves your life.
If you make a chart like this I’d love to see it! Send them to lauren [at] laurentonge [dot] com